Governing Law; Dispute Resolution
While lawsuits between database licensors and library licensees are rare, it is nonetheless wise to consider how to resolve disputes. Dispute resolution provisions address whether the parties will try arbitration or mediation instead of law suits in a court.
Governing law and venue provisions allow the parties to decide ahead of time what state’s law will govern interpretation of the contract and where suits must be filed.
Governing law is particularly relevant in disputes. Because parties (and their lawyers) are more familiar with the laws of their home state, parties usually want their state’s law to apply to any dispute involving the agreement. For libraries that are part of a state institution (for example, the University of Texas System component institutions), there may be compelling reasons to insist that the institution’s state law applies. State institutions may be constrained or benefited by their state’s laws. If another state’s law governs the contract, a state institution may be stripped of special defenses under its own law. Example 2 illustrates a compromise to preserve special defenses available to a state institution regarding its indemnification obligations (if it has any) while agreeing in general to be bound by another state’s law.
Sometimes parties also plan for the effect a dispute will have on continued access to licensed materials. For example, the parties could provide that “in the event of a dispute, the licensee will pay its fees into an escrow account pending resolution of the dispute in exchange for continued service.” Licensees should not hesitate to add language, in plain English, that gives them the rights they need.
Governing Law; Dispute Resolution: Example Clauses
| Governing Law |
| 1. This Agreement shall be interpreted and construed according to, and governed by, the laws of [Jurisdiction Convenient to All Parties], excluding any such laws that might direct the application of the laws of another jurisdiction. The federal or state courts located in [Jurisdiction Convenient to All Parties] shall have jurisdiction to hear any dispute under this Agreement.2. This Agreement shall be governed by and construed in accordance with the laws of the State of [Licensor’s state], except for matters arising from or concerning Section __ (Indemnification) which shall be governed by and construed in accordance with the laws of the State of [Licensee’s state]. |
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Commentary: If parties residing in different states of the United States or different nations have a dispute, a court would have to apply special rules to determine what body of law to use to resolve the dispute. By including a governing law provision in the contract, the parties agree on this choice ahead of time.Depending on the nature of the dispute, the law of some states may favor one party or the other. For example, some states’ laws favor business interests over consumers’ interests. On the other hand, some states have a highly developed, refined and predictable body of law dealing with certain kinds of disputes. California and Massachusetts have had considerable litigation of computer-related matters. If a dispute involves issues in this particular area, the parties would be fortunate to have either of those state’s law governing their contract.
Of course, we cannot know today what we may be upset about tomorrow. Perhaps the best approach for universities and libraries is to be sure that the chosen governing law does not unduly favor the other party or differ markedly from the institution’s state law.
Example 1 also contains a Forum Selection clause as well as a choice of governing law clause. Selecting a forum establishes where the parties must go to file a lawsuit (in this example, in the courts of the Licensor’s state). This selection may result in extreme hardship for the party that must travel to the selected state. If a contract does not include a forum selection clause, there are procedural rules that govern where lawsuits may be filed. They are generally more favorable for the party being sued.
Some clauses designate the forum as the location of the party being sued. The mutual inconvenience of such an arrangement makes it seem fair: Whoever wishes to institute a lawsuit must travel to the other party’s state to file and prosecute it. |
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| Dispute Resolution |
| 1. In the event any dispute or controversy arising out of or relating to this Agreement, the parties agree to exercise their best efforts to resolve the dispute as soon as possible. The parties shall, without delay, continue to perform their respective obligations under this Agreement which are not affected by the dispute.Mediation. In the event that the parties can not by exercise of their best efforts resolve the dispute, they shall submit the dispute to Mediation. The parties shall, without delay, continue to perform their respective obligations under this Agreement which are not affected by the dispute. The invoking party shall give to the other party written notice of its decision to do so, including a description of the issues subject to the dispute and a proposed resolution thereof. Designated representatives of both parties shall attempt to resolve the dispute within [time period] after such notice. If those designated representatives cannot resolve the dispute, the parties shall meet at a mutually agreeable location and describe the dispute and their respective proposals for resolution to responsible executives of the disputing parties, who shall act in good faith to resolve the dispute. If the dispute is not resolved within [time period] after such meeting, the dispute shall be submitted to binding arbitration in accordance with the Arbitration provision of this Agreement.
Arbitration. Any controversies or disputes arising out of or relating to this Agreement shall be resolved by binding arbitration in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association. The parties shall endeavor to select a mutually acceptable arbitrator knowledgeable about issues relating to the subject matter of this Agreement. In the event the parties are unable to agree to such a selection, each party will select an arbitrator and the arbitrators in turn shall select a third arbitrator. The arbitration shall take place at a location that is reasonably centrally located between the parties, or otherwise mutually agreed upon by the parties.
All documents, materials, and information in the possession of each party that are in any way relevant to the claim(s) or dispute(s) shall be made available to the other party for review and copying no later than [time period] after the notice of arbitration is served.
The arbitrator(s) shall not have the authority, power, or right to alter, change, amend, modify, add, or subtract from any provision of this Agreement or to award punitive damages. The arbitrator shall have the power to issue mandatory orders and restraining orders in connection with the arbitration. The award rendered by the arbitrator shall be final and binding on the parties, and judgment may be entered thereon in any court having jurisdiction. The agreement to arbitration shall be specifically enforceable under prevailing arbitration law. During the continuance of any arbitration proceeding, the parties shall continue to perform their respective obligations under this Agreement. |
Last updated: April 25, 2012